The dollar is strong compared to what?

As you should know by now, I focus on the “Big Picture” and that means looking back as well as looking ahead. It is hard to know where we are going without an occasional glance at where we’ve been. This might startle you, but in 1980 our total national debt was only $771 billion. In nominal terms, that number is less than half of President Obama’s largest annual deficit. Worse yet, if the government used GAAP accounting standards to calculate the deficit, it would run around $5 trillion a year. We are not headed toward a fiscal cliff, we’ve already plunged off of it but most people are unwilling to acknowledge that it’s past the time to discuss it.

No matter who wins the upcoming election, the problems will not be solved.

We received an email from one of our clients and supporters and he was complimentary but for one comment – he called me (and Andy Hoffman) to task for writing that we usually vote for the “lesser of two evils.” I would like to point out that I also said, “It no longer makes a difference which party wins the election because we are past the point of fixing the problems.” Other than social issues, and taken strictly on fiscal issues, neither the Democrats nor the Republicans can fix a $5 trillion annual deficit with tax increases and spending cuts. In fact, they can’t even balance the budget based on the phony $1.5 trillion number that used in the conversations. Positive thinking and being an optimist are not enough here – they just make you feel good, all the way to the hospice.

Watch these two important numbers

Two numbers to keep focused on – $1,775 gold and $35 silver. The resistance there is very stiff and it’s “coordinated by the central banks,” according to Jim Sinclair.

The dollar is strong – compared to what?

A common mistake is to place a value on the U.S. dollar relative to other currencies (as in the USDX). In order to get a more realistic picture of the dollar’s performance, I choose to compare it to REAL MONEY, gold. Here is a useful chart to show the comparison.

In the last 21 months, gold moved up from $1,421 to $1,763 but check out the currencies, below. They all fell. Compared to the other currencies, the dollar’s performance looked o.k. but that is not the true picture. That’s why governments and central banks hate gold and do everything in their power to discredit it and to hold back its gains.

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